How to Start a Bankruptcy

In order to File Bankruptcy it is important to gather certain information in advance. Bankruptcy can be a long, tedious, and stressful process and adequate preparation will help it go as smoothly as possible. Even if you intend to hire a bankruptcy attorney, you should remember that they usually charge hourly so if you can reduce the amount of time they spend asking you for information or trying to find it themselves, you can reduce your bill.

The first step is to get a basic understanding of the different types of bankruptcy in order to have an intelligent conversation with your lawyer or to make the decision on your own. The most common type of bankruptcy is Chapter 7 bankruptcy. This is a liquidation of all assets except personal necessities to pay off the debts. Chapter 13 bankruptcy is available to individuals with a regular source of income and consists of making a three to five year repayment agreement with the creditors. Chapter 11 bankruptcy is available to businesses and consists of reorganization and repayment agreements.

For all types of bankruptcy, detailed financial information is always required. The debtor will need to complete a statement of all assets owned and all liabilities. A statement of income and expenses is also needed. Any other long term obligations, such as leases or contracts must also be listed. If the debtor is married, this information will also be required for the spouse, even if the spouse is not also filing for bankruptcy.

In order for a bankruptcy to be completed, a debtor will also be required to have taken a financial management course or have undergone credit counseling. The hope is that they will combine this knowledge with the fresh start given and not fall into debt again.

Bankruptcy also has mandatory filing fees. These are between $200-500 total depending on the type of bankruptcy. Installment payments over three to six months are often permitted, however total waivers are granted only in cases of severe hardship.

The use of non-attorney bankruptcy petition preparers is not recommended. Because they are not attorneys, they are not permitted to give legal advice and are only permitted to type information into the bankruptcy forms available on the bankruptcy court’s website for free.

 

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